The stories linking online media owners with drops in revenues from ad spend are now numerous. MS, and Yahoo have all declared revenue falls from ads and, in the UK, NMA reports that the major media owners are doing discounted deals on premium display spots. They all point to an issue that has been looming for a while: that banners and buttons have failed to make their case as vehicles for brand advertising. Now the crunch is here, this will mean the web – at least in terms of brand cash – will suffer more than most.
Our estimates are that only about 20% of all online spend is brand money – the vast bulk is direct response. While search has 60% of the total market, even banners and buttons are direct-response driven in most cases. Consider that ad networks, which ordinarily sell on a CPC or CPA, are said to account for about 40% of display spend.
Delivering on response
The problem is that banners and buttons do not deliver particularly well on direct response objectives, especially when compared to search. This means that CPMs are forced down since they don’t convert and, when media planners return to their spreadsheets, they either take sites and networks off the plan or demand cheaper rates to make it stack up. There are ways the media owner can combat this, better creative/placement/timing/integration with the client site etc. But, the chief hope for the world of banners has been that they are a brand-building tool. Unfortunately, against this objective they tend to perform even worse.
No reach & frequency
Planning reach is a traditional ‘brand’ planner’s bread and butter. A TV buyer buys an agreed percentage of the audience it’s aiming at and an agreed frequency (the amount of times one of its audience sees the message) – and gets money back where the campaign doesn’t reach enough of them the right amount of times. Online can’t promise this in a reliable way because there’s no agreed measure to plan or buy against. Of course a big old debate surrounds the validity of this view, but the fact is that big brand advertisers like FMCG companies have modelled reach & frequency in massive detail back to sales. Rightly or wrongly, they rely on it – online doesn’t fit in.
Impact
Whether we like it or not a 30-second TV spot has a much greater impact on our awareness and view of a brand than a 468×60 banner. This would be fine if the price reflected this shift in impact but since we have still to effectively measure the impact of a banner on these things, we can’t work out the right price. A large problem is that advertisers – and media owners help them in this – continue to measure the impact of a banner on clicks, even when the objective of the banner is awareness. Since these clicks aren’t measured effectively back to sales, the value isn’t proven and budgets stay small.
Now the crunch is here
In times of difficulty, we all revert to type. What online has so far managed to prove is that, for direct-response objectives, it is the best medium by a mile since you only pay for what you get, thus DR budgets will continue to come its way. Since banners don’t deliver as effectively as solutions like search, expect search’s share to continue to grow and CPMs to continue to fall. NMA’s story tells us that it is premium locations – i.e. the spots where those few online brand campaigns are usually placed – where CPMs are being discounted. This tells us the brand argument has not been won. Since it remains unproven, brand advertisers will bank on what they know. TV’s budgets will most likely fall but its share is likely to grow.
The future is digital in the sense that all media will eventually be delivered over the internet. But, if we believe the rise of online media as an ad channel is inexorable, then we’re failing to understand how advertisers think and ignoring the trends that lie beneath its growth so far.
Filed under: Display advertising, Search
